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to make the partitions linux native you need to run linux fdisk. The setup should give you and option to do that. you will need at least one partition linux native, and one partition linux swap(unless you have tons of ram-64megs)
I don't understand the SCSI error you are getting. Maybe you could clarify. Are you using some kind of software like ontrack diskmanager for large IDE hard drives? If so linux doesn't like those programs, and may not be seeing your ide drives.
Please comment back if you have more questions.

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I am booting from LILO so I don't think it would have anything to do with a disk manager. I have not recieved an option to create a linux native partition, how can I run linux fdisk from the CD? Can I make the partition linux native using fips?

You need to be running linux to get to linux fdisk. Boot up with the red hat disk. When the install comes up type ctrl-f2 that will take you to virtual console 2 and give you a unix prompt. Type fdisk from there. Type ctrl f1 to get back to install.
Install should give you the chance to run fisk in the normal install process.